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Total costs for the restructuring of the Energy Complex Oltenia are up to 3.94 billion euro

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The European Commission published the Decision which mentions the approved measures included in the State Aid for restructuring in favour of EC Oltenia and the Plan for Recovery belonging to it, decision which was officially announced on 26th January 2022. The total costs for restructuring of the EC Oltenia are up to 3.94 billion euro.

 

The European Commission has published the decision detailing the measures approved under the State restructuring aid in favor of EC Oltenia and the related restructuring plan, a decision that was officially announced on 26 January 2022. The EC Oltenia restructuring plan is based on two main pillars: Building new capacity based on solar and gas and reducing existing lignite-based capacity. The plan has been approved by the Romanian Government and the European Commission and must be implemented as a necessary measure of refurbishment and maintenance of CE Oltenia, given that the company is an essential component of the national energy system,” the company announced.

 

The total costs for restructuring are 3.94 billion euro. Out of this sum, approximately 2.7 billion euro are state funds which include a grant of approximately 896 million euro from the Modernisation Fund, destined to the new investments. The contribution of CE Oltenia will be 1.27 billion euro, source being the income from sales of electricity and partnerships and loans drawn by EC Oltenia.

 

The measures included in the Decision aimed at the observance of the criteria for the state aid    the company is already benefitting from and will benefit to the end of the period for restructuring, namely the end of 2026.

 

Thus, the restoration of profitability at the end of the restructuring period – which is an essential criterion in a state aid for restructuring – was achieved through measures to optimize existing capacities and expand the portfolio with the inclusion of new projects: Natural gas plants and photovoltaic parks with a total installed capacity of about 2.000 MW. In the period 2023-2025, blocks 4 Rovinari, 4 Turceni and 7 I?alnita will be in capacity reserve, and in the period 2026-2030, blocks 5 Rovinari, 6 Rovinari and 5 Turceni will be in capacity reserve. The operation of these blocks will be dictated by reasons related to security of energy supply or market conditions,” the company said. 

 

In order to meet the criterion of structuring and adequate remuneration of the restructuring aid, several future actions from both significant shareholders – the Romanian State and Fondul Proprietatea – were included which relate to participation in capital operations.

 

In addition, the Romanian authorities have committed to implement a sufficient divestment of shares of the Romanian State in EC Oltenia by the end of the restructuring period in 2026, so as to ensure an additional remuneration of the State aid grant component. The assignment of at least 20% of the property rights will be made through a public offer of shares.

 

The size and structure of EC Oltenia’s own contribution to the total restructuring effort of EUR 3,94 billion is the third criterion that formed the basis for the favorable decision. Thus, the company was able to demonstrate that together with the amounts received from the electricity sales contracts it attracted considerable, additional sources from bank credits and contributions from selected partners to new projects.

 

The partnerships are being negotiated and will lead to the establishment of SPVs – project companies that will underpin the development of new projects – in the course of 2022.

 

The joint venture measure (SPV) was a mandatory element of the EC Oltenia restructuring plan in order to avoid distortions of competition and to ensure its own contribution to the restructuring cost of EUR 3,94 billion, these are the conditions necessary to be fulfilled for the approval of state restructuring aid. Moreover, the establishment of the lignite subsidiary is a measure that prevents cross-subsidization and thus distortions of competition.

 

Another measure is outsourcing of Craiova II, a measure which is implemented according to the initial calendar under the form of division, the new judicial entity having the same shareholders as EC Oltenia. It is the first measure which contributes to the creation of a viable player which will operate with an integrated model, from production to transport and distribution of thermal energy and will be able to access similar finances to the ones used by EC Oltenia for new projects.

 

The measure on the establishment of the lignite subsidiary involves the creation of an entity with separate legal and accounting personality from CE Oltenia, which will integrate the lignite-based electricity production activity, maintained under capacity reserve regime. The holding structure, which will be reached in the future following the steps described in the Restructuring Plan, is a model widely spread throughout the world.

 

As a result of the decarbonization process, emissions will fall from 8,4 million in 2022 to 4,1 million in 2025 and 3,7 million in 2030, with the use of lignite-based reserve capacities.

 

In the new global energy context, the restructuring plan offers a degree of flexibility, as there is a need for increased domestic production. Thus, there is the possibility of supplementary measures, temporary, whose effects can be adjusted until the end of the restructuring period.

 

This year, the company has already taken measures for the increase of coal production by 900,000 tons, which would deliver total energy of 600,000 MW, in one of the already existing capacities in Rovinari, Turceni or Isalnita.

 

EC Oltenia will hire, for a limited period of time, 600 people as mechanical locksmiths, electricians and welders in mining activity. More than half have already been employed and will begin work this month. It is a temporary measure, designed for this difficult context and which can be activated without, at the end of the implementation of the plan, changing its structure.

 

 

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